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This blog is for students, managers and those lay people who are interested to contribute to, comment on or simply share their workplace problems and are keen to learn about issues relating to public finance, corporate finance and macro-economic management affecting their lives.

Tuesday, August 31, 2010

It is debt, and not the floods, that can sink Pakistan economy.....

The devastating floods in Pakistan have washed away not only the crops, roads and bridges but have also drowned livestock and inundated houses. The economic infrastructure of over 70% agrarian Pakistan has been destroyed. This is leading the government to find quick-fix solutions which would eventually prove to be compromising on the national security. The biggest quick-fix solution is seeking expensive external aid from the World Bank and Asian Development Bank. As already reported in a previous post on this blog, debt is a national security threat, one of the greatest we know of...., Pakistan’s existing portfolio of external debt is around $55 billions which is not sustainable by any standard. Pakistani government is trying to add, to this portfolio, further debt which will make it $74 billion in a period of three years. Is the government unaware of the threats to national security? Another article appearing in a sister blog, the 4D catastrophe, death, disease, destruction....and now the debt trap will make an interesting reading.

The government may or may not be aware of this, but the citizens certainly are. The Christian Science Monitor has reported that the end of what may be the worst flooding in Pakistan’s history could soon be in sight, according to government officials. Now officials will be preoccupied with providing relief to some 17 million people – and reviving the country’s devastated economy. As part of that effort, In Pakistan’s major cities, a movement to cancel Pakistan’s external debt, which is set to reach some $74 billion by 2014, is now under way.

“Our annual debt servicing is on average $3 billion. That is almost three times the amount the government of Pakistan pays on health care,” says Abdul Khaliq Shah, the country’s spokesman for Committee for Abolition of Third World Debt. Mr. Shah organized a gathering of leading Pakistani intellectuals and rights activists in the eastern city of Lahore on Sunday to discuss the protesting of foreign debt. They are hoping to persuade international officials to cancel Pakistan's debt to help flood affectees. A protest is planned to take place in front of Pakistan’s parliament house on Sept. 2.

Shah says the prevailing conditions in Pakistan after the flooding justifies the repudiation of debt under a UN Human Rights Commission resolution titled "State of Necessity," adding that up to 70 percent of Pakistan’s external debt was accrued under the rule of dictators and should therefore be waived, just as the US refused to pay most of the external debt accrued by Saddam Hussein’s government. The other argument for debt cancellation among participants was the president that countries facing similar tragedies to Pakistan’s catastrophic flooding set. As they recover, countries are often forced by international financial institutions and donor countries to mortgage their future as they borrow for relief and recovery efforts, magnifying problems for years.

Though Pakistan’s Geo News on Tuesday reported that eight more villages in the province of Sindh were inundated by the raging waters, residents were evacuated beforehand, according to Pakistan disaster management official Hadi Baksh. The worst of the flooding that originated in the country’s northwest and swept southward is over Bakhsh, according to the Associated Press. “The floodwaters are now heading to the Arabian Sea,” he said.

The flooding began some four weeks ago and has so far claimed about 1,600 lives, left more than 4 million homeless, and damaged more than 7.9 million acres of farmland, according to the UN’s food agency. Recovery is slated to take months, if not years. Agriculture accounts for almost one-quarter of Pakistan’s economy. International aid was slow to trickle in, though as of last week, it stood at more than $800 million. Pakistan’s talks with the International Monetary Fund in Washington continued on Monday, as IMF officials insisting Pakistan will need to continue to implement tax and energy sector reforms for an $11.3 billion loan negotiated in 2008, according to Dawn, a leading Pakistani daily.

1 comment:

Agreed............But more borrowing is not the only solution to address prevailing adversity ..........instead our Finance Ministry should gear up (wakeup) and explore options of getting even the present loans waived off................there are such clauses and the obtaining environment rightly justifies any endeavour to mitigate the sufferings of poor Pakistani nation.................We should beg less and think more................Moreover, the nation should be prepared to think big and rise above petty politics. For example, construction of Kalabagh dam be accorded top priority (i think when more than 10 lakh cusecs is passing through Sind, it should lay rest to the fears of Sindhi Politicians that in case of Kalabagh Dam they shall be deprived off their water share and ANP probably has learnt the lesson for opposing the dam after having bearing the brunt in terms of human lives), moves like Karz Utaro Mulk Sanwaro may be relaunched to help out flood affectees. Ciao.... ARM